Today, individuals who commit financial crime try to conceal the proceeds of the crime through money laundering, but the question is what is money laundering, what are the stages and methods involved.
The term "money laundering" originates from Mafia ownership of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to show a legitimate source for these monies.
Money laundering is the process by which large amounts of illegally obtained money from drug trafficking, terrorist activity or other serious crime is given the appearance of having originated from a legitimate source. It is estimated that more than $500 billion of money is being laundered annually.
Process/Stages involved in Money laundering
Placement stage: This involves the physical movement of currency derived from illegal activities into the financial system.
Layering stage: These involve the separation of proceeds from illegal source by using multiple complex financial transactions (e.g. wire transfers, monetary instrument) to obscure audit trail and hide the proceeds.
Integration stage: Illegal proceeds are converted into legitimate business earnings through normal financial or commercial operations.
Money laundering methods
· Structuring deposits: This method involves breaking up large amounts money into smaller or less suspicious amounts. The money is then deposited into one or more bank accounts either by multiple people or by a single person over an extended period of time.
· Overseas banks:Money launderers often send money through various "offshore accounts" in countries that allow anonymous banking.
· Investing in legitimate businesses:Launderers sometimes place dirty money is placed in legitimate businesses to clean it. They may use large business like brokerage firms or casinos that deal in so much money
· Shell companies: These are fake companies that exist for no other reason than to launder money. They take in dirty money as "payment" for supposed goods or services but actually provide no goods or services.
Preventive measures against Money laundering
The FATF (Financial Action Task Force) issued the "40 Recommendations" for banks (there are actually 49 now, but the moniker hasn't changed) that have become the anti-money-laundering standard. These recommendations include:
· Identify and do background checks on depositors.
· Report all suspicious activity. (For example, if a background check revealed that depositor A works in a steel factory, and he typically deposits $2,000 every two weeks, a series of 10 $9,000 deposits over the course of two weeks should raise a red flag.)
· Build an internal taskforce to identify laundering clues.
Conclusion
Finally it is clear from all indications that financial crime is illegal, illegitimate and not something that one should be involved in.
The term "money laundering" originates from Mafia ownership of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to show a legitimate source for these monies.
Money laundering is the process by which large amounts of illegally obtained money from drug trafficking, terrorist activity or other serious crime is given the appearance of having originated from a legitimate source. It is estimated that more than $500 billion of money is being laundered annually.
Process/Stages involved in Money laundering
Placement stage: This involves the physical movement of currency derived from illegal activities into the financial system.
Layering stage: These involve the separation of proceeds from illegal source by using multiple complex financial transactions (e.g. wire transfers, monetary instrument) to obscure audit trail and hide the proceeds.
Integration stage: Illegal proceeds are converted into legitimate business earnings through normal financial or commercial operations.
Money laundering methods
· Structuring deposits: This method involves breaking up large amounts money into smaller or less suspicious amounts. The money is then deposited into one or more bank accounts either by multiple people or by a single person over an extended period of time.
· Overseas banks:Money launderers often send money through various "offshore accounts" in countries that allow anonymous banking.
· Investing in legitimate businesses:Launderers sometimes place dirty money is placed in legitimate businesses to clean it. They may use large business like brokerage firms or casinos that deal in so much money
· Shell companies: These are fake companies that exist for no other reason than to launder money. They take in dirty money as "payment" for supposed goods or services but actually provide no goods or services.
Preventive measures against Money laundering
The FATF (Financial Action Task Force) issued the "40 Recommendations" for banks (there are actually 49 now, but the moniker hasn't changed) that have become the anti-money-laundering standard. These recommendations include:
· Identify and do background checks on depositors.
· Report all suspicious activity. (For example, if a background check revealed that depositor A works in a steel factory, and he typically deposits $2,000 every two weeks, a series of 10 $9,000 deposits over the course of two weeks should raise a red flag.)
· Build an internal taskforce to identify laundering clues.
Conclusion
Finally it is clear from all indications that financial crime is illegal, illegitimate and not something that one should be involved in.
1 comment:
It was a very interesting speech about "Money Laundering" and I enjoyed listening to you.
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